Before a packed session room during NACM's 2013 Credit Congress, six credit veterans testified as part of a Public Field Hearing being conducted by the American Bankruptcy Institute (ABI) on the needs of changes to the Bankruptcy Code in the areas of Section 503(b)(9) and preferences. What resulted was a lively discussion with seven members of the ABI Commission to Study the Reform of Chapter 11.

ABI's Geoffrey Berman noted that, with changes in the world financial environment, “a better set of tools is required” on Chapter 11 bankruptcy. Primarily, the Bankruptcy Code “was not designed to address these changes.”

An important topic that came up several times during the hearing was the topic of creditors' committees. While questions arose about costs involving committees, the ability to find people in the trades willing to serve well and, at times, conflicts of interest, the value of committees appeared to be reflected during ABI commission members' comments. ABI's William Brandt, Jr. said it was very unlikely creditors' committees “will see their sunset.”

“Our task is not to roll back the tides of history but reset the equilibrium,” Brandt said. Meanwhile, Commissioner Steven Hedberg noted the importance of the commission “balancing rights” between secured and unsecured creditors. “It's a big part of what's going to happen in this process.” However, such “balance” discussions also led to the theory as to whether or not service providers should have the same rights within 503(b)(9) as manufacturers.

On preferences, Berman took exception to testimony regarding the idea that all or majority of trustees are shot-gunning without analysis or care while filing preference claims. “Not everyone takes a check register and files a lawsuit,” he said. “Saying a trustee is just taking a check register and filing lawsuits is not typically accurate. Yes, there are firms that too that, but that's not how everybody does it.”

Berman also got into a spirited debate with Past-National Chairman Kathy Tomlin, CCE, of Central Concrete Supply Co., Inc., over the proposal that the onus should be on those filing the preference claim rather than the creditor. He also intimated that the “guilty until proven innocent” theory could be working against creditors.

Berman argued that modern credit managers have a greater opportunity/ability to gather information than ever before—“The moment you have a claim, [you can] go pull the records.” Tomlin responded that creditors only had their own record and that advances in technology have worked to provide debtors with that same greater opportunity/availability of info.

-Brian Shappell, CBA, CICP, NACM staff writer

“If you think taking a risk is the right thing to do, you've got to do it,” said author/entrepreneur/famous card-counter Jeffrey Ma in his speech during NACM Credit Congress' Super Session and Annual Business Meeting Tuesday. “You can't favor inaction over action.”

Risk again emerged as a prevalent buzz topic on the minds of credit professionals at this year's Congress, held in Las Vegas. Ma, who won millions of dollars at casinos playing blackjack as part of the infamous MIT Blackjack Team that inspired the movie “21,” drove home that point, albeit in ways with which credit professionals may not be familiar. This included recalling his decision to trusti in well-developed, mathmatical-based methods that saw him continue playing blackjack during a weekend in which he lost two consecutive hands valued at $50,000 early during that trip. For what it's worth, Ma didn't finish with $70,000 in gambling profits for the weekend.

“You can make the right decision without getting the right outcome...but, if you have a system you really believe in, you have to stick with it,” Ma told delegates.

NACM, itself, also honored a number of members in some respects for their action: on boosting membership, on pursuing education and inspiring staff and co-workers, for general service and on down the line. The following are among those who received awards for their contributions to NACM over the last year in increasing membership at the Affiliate level:

-NACM Oregon

-NACM Gulf States

-NACM Minneapolis

-NACM St. Louis Gateway Region

-NACM Wisconsin

-NACM Rhode Island & Southern New England

NACM also recognized Denis Moller, CCE, ICCE, of Tru Vue, Inc., with as the Graduate School of Credit and Financial Management 2012 Student Leadership Award.

-Brian Shappell, CBA, CICP, NACM staff writer

Check back here throughout the week for continuing coverage from the 2013 Credit Congress in Las Vegas, including articles on emerging trends and high-level education sessions on-site.

The National Association of Credit Management's (NACM's) 117th Annual Credit Congress kicked off in Las Vegas this morning with an insightful presentation by Terry Jones, founder of Travelocity and author of On Innovation.

Jones tailored his comments specifically to fit the audience of over 1,200 credit and risk management professional, relying on his lengthy track record of internet business success to open attendees' eyes to new perspectives on how companies can grow in an interconnected world. First, Jones noted that innovation and creativity are separated by one important difference. “Creativity is thinking up new things. Innovation is about doing,” he said. “It's about putting an idea to work,” Jones added, showing a humorous slide that illustrated “the thinker and the doer” in which the doer was nowhere to be found. “The doer left,” said Jones. “He's out doing.”

The speed of today's business world requires companies to embrace change and accommodate what's become a very powerful buyer. “We're talking about innovation because change continues to accelerate,” said Jones. “We're living today in a wired world. Customers are getting smarter and they have those tools in their toolbox. This new world is a world where choice happens instantly. It's a world where prices are transparent.”

Information, said Jones, had escaped thanks to the Internet. “It's found its freedom,” he noted. “It's being beamed to us all the time and we are empowered by it.” Companies that fail to accept this new reality and cling to refrains like “we've always done it this way” will find themselves left behind as other, smarter companies embrace change and aim to thrive in it. “If you don't like change,” said Jones, “you're going to like irrelevance even less.”

Jones went on to discuss the big structural changes that are required for companies to create what he called “a culture of innovation.” “It's about new service models, new payment models,” he said. “It's about taking a little bit of money and making it a bigger pile of money.”

Innovation, according to Jones, has two pillars: the culture and the team. The former aspect is often where companies tend to lose themselves, he observed. “Culture eats strategy for lunch. If you don't have the right culture, it doesn't matter how good the planning effort is,” said Jones. “You simply won't move forward unless you create a culture of innovation.”

What Jones urged attendees to build was a culture where failure isn't necessarily a bad thing, describing a “culture of innovation” as “a place where creativity can exist.” “Innovation is not the Olympics,” Jones said. “Innovation is like baseball, and in baseball, if you fail 70% of the time, you're actually doing pretty good.”

Jones was just the first of many presentations scheduled at this year's Credit Congress that aim to give today's credit and risk professionals the knowledge they need to thrive now and in the future. He greeted attendees and signed copies of his book, On Innovation, in the NACM booth at the Credit Congress Exhibition Hall after his enlightening presentation.

- NACM
 

The Basel III standards for international banking are set to take effect within months. And despite numerous attempts to clarify sections of the accord, there is still so much unknown about the impact the changes will actually have, said panelists at the Finance Credit & International Business Association (FCIB) Annual International Credit & Risk Management Summit in Prague.

Elisabeth Sutter-Becska, vice president, head of global export finance at Raiffeisen Bank International in Austria, says rising importance of the trade credit role and for funding costs, among other increased costs in general, should be expected. As such, trade creditors and their businesses should be preparing in a number of ways in the near-term: Reassess working capital management, consolidate treasurer operations, optimize payment streams, improve receivables management, shorten payment tenors when possible and diversify resources. Still, it is hard to plan actions because of how difficult it is to predict what will actually occur.

“Nobody can say what is going to come from the three regulation, and there are not studies that have determined what would be the affect on the real economy,” she told FCIB delegates.

Meanwhile, panelist Neil Ross, trade credit insurance profit centre manager EMEA, AIG Euopre Limited in the United Kingdom, also voiced concerns about potential confusion about what will actually happen.

“One of the things that strikes me, you have the Basel III rules, but it's up to each country to interpret the rules; each country has slightly different interpretation,” said Ross. “It makes it much more complicated.”

Ross added that credit insurance will likely play a a bigger role as banks are “under pressure to keep head counts down...Doing analysis on thousand of buyers is frankly not where the banks want to be right now.”

-Brian Shappell, CBA, CICP, NACM staff writer

The Finance, Credit and International Business Association (FCIB) will hold its first Spring Conference at the National Association of Credit Management’s (NACM’s) 117th Credit Congress & Exposition on May 18-21, 2013 at the Rio Hotel in Las Vegas. NACM's Credit Congress has always provided a venue for both domestic and international credit professionals who extend business-to-business credit, but with the inclusion of a specialized Spring Conference comes a focus on the growing opportunities in global trade.

“The purpose of the FCIB Spring Conference is to expand the knowledge base for U.S. companies that are starting to export, and to further educate and provide tools for the advanced international credit management executive,” said Marta Chacon, CICP, FCIB Director - The Americas. “The specially-designed sessions will address the pressing issues facing international trade professionals around the world, and provide the solutions that work in various global markets.”

The FCIB sessions, integrated into the Credit Congress schedule of events, focus on expanding the efficiencies in international credit management. Topics include how to create profit, reduce risks, identify the potential pitfalls in exporting, discuss ethical compliance in order to work effectively on a global level and cover the intricacies of doing business in the United States' largest trading partners, Canada and Mexico.

The Spring Conference comes on the heels of other noteworthy FCIB endeavors. Earlier this month, FCIB entered into a strategic partnership with the U.S. Commercial Service to promote exporting under President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. The partnership aims to make it easier for all U.S. companies to take advantage of exporting opportunities offered around the globe, with FCIB acting as a portal through which exporters can find the tools and resources they need. Under the partnership, FCIB has already played a role in the development of the third edition of the International Trade Agency’s Trade Finance Guide, and the first Spanish-language version of the guide.

“With an estimated 95% of the world’s buying power existing outside the United States, U.S. businesses of all sizes should consider the benefits of selling their products and services abroad,” said Chacon. “By incorporating a spring conference into the yearly Credit Congress, FCIB furthers its role in helping companies expand into the international market. With FCIB's sessions open to all registrants, those looking to begin exporting, as well as already-advanced international trade professionals, receive the benefits of tailored education, in addition to numerous networking opportunities and an expo of product and service providers that a large venue offers.”

FCIB and NACM welcome walk-in registrants and the press.

- FCIB

In a meeting that followed the Finance, Credit and International Business Association’s (FCIB’s) Annual International Credit and Risk Management Summit, members of the European Commission promoted the purposes and potential for success of the European Late Payment Directive. Those many aren't convinced that setting harder limits on the amount of days government entities and debtor companies will actually cause positive change and trump local laws, especially in places where slow paying is an engrained culture, some see it as an important step.

“It’s the best thing to happen in credit management in a decade because now we have European [Union] support. That gives us higher profile as credit managers,” said Mark Harrison, chief executive of the Czech Institute of Credit Management during a panel during the FCIB event.

In an FCIB interview onTuesday, Antti Peltomaki, deputy director-general of the European Commission’s Enterprise and Industry Directorate-General, said he understands the those being skeptical over the speed of cultural change, but sees the Directive as a critical step in the right directions for credit-granting businesses. “It is good and important to have the legal framework...It is up to you whether you want to do something," said Peltomaki.

-Brian Shappell, CBA, CICP, NACM staff writer  
The extended version of this story, including more from Peltomaki, published in this week's edition of eNews, is available by clicking here.

At this week’s Finance, Credit and International Business Association’s (FCIB’s) Annual International Credit and Risk Management Summit in Prague, two FCIB members—Angela Bradbury, ICCE and Daniel Van Damme—were presented with its distinguished Service, Development and Growth (SDG) Award.

Bradbury, group credit and payable manager with Innospec, Inc. in the United Kingdom, and Van Damme, group working capital manager with Tessenderlo Chemie SA in Belgium, joined the short list of SDG award winners. Van Damme serves as the chairperson of the Chemicals Industry Group and Bradbury serves on FCIB’s European Advisory Council and is a frequent conference speaker, taking part in the Prague summit and scheduled to present at next week’s Credit Congress in Las Vegas.

“They have tirelessly worked to educate their staff, to really contribute and give back into the international credit community,” said Noelin Hawkins, FCIB director, Europe, The Middle East & Asia. “I can’t recall anyone working harder.”

The award is designed recognize the valuable contributions volunteers are making to further grow and develop FCIB’s member services and to encourage more people to serve. The first winner of the award, Mannes Westhuis, LL.M., CICP, Bierens Debt Recovery Lawyers, also eloquently described it as something that represents a win-win situation for today’s international credit-related professional: getting in touch with customers and information on leads, while “being socially and professionally responsible.”

- Brian Shappell, CBA, CICIP, NACM staff writer

All eyes have been on Spain when it comes to nervous businesses owners, credit professionals and other market-watchers wondering when the next European sovereign insolvency is going to occur. And while it would be overly optimistic to assume that danger wasn't imminent in Spain, a top four economy, by size, on the continent, another nation may beat it to default: Slovenia. At least that was the sentiment at FCIB's Annual International Credit & Risk Management Summit in Prague.

“Slovenia is far riskier than Italy or Spain,” said FCIB panelist Silvina Aldeco-Martinez, managing director of Risk Analytic Products, Standard & Poor's. She noted that, unlike Spain, it's not overall risk throughout many sectors; it's just massive problems in its banking sector.

Freddy Van den Spiegel, of BNP Paribas Fortis, agreed that Slovenia may slide into insolvency and that Spain faces many issues. Because of the nature of the problems and size/importance of its economy to the EU, Spain's filing, should it occur, would be a significantly bigger event. He said the prospects for Spain continue to generate pessimism because its high unemployment (25% among the young) shows little signs of improving because the nation doesn't have solid products and brands to make them competitive and, thus, pull themselves out of the rut. The big problem therein is that France, once hoped to help the recovery financially as much as Germany, holds so much Spanish debt.

“If it happens, we'll see what happened in Cyprus: panic,” the Belgian-based economist said. “If Spain gets into trouble, then France comes onto the radar”

All that said, Van den Spiegel still believes the European Union and the common currency will survive, but in a setting of more centralized EU power both in lawmaking and on the part of the European Central Bank.

-Brian Shappell, CBA, CICP, NACM staff writer

Off the strength of continued growth as a hub for service centers and more generalized outsourcing, nations in eastern Europe, Soviet Bloc countries until the late 1980s, are emerging as slightly bigger players in the business and credit world. However, the corporate information emanating from there often is not entirely trustworthy, said panelists at FCIB's Annual International Credit & Risk Management Summit in Prague.

FCIB panelist Elisabeth Sutter-Becska, of Raiffeisen Bank International in Austria, noted that problems with performing loans levels in Ukraine and Russia are increasing again after a few years of improvement. Fellow FCIB panelist Fabrice Morel, of Berne Union, noted there was a major spike in 2008 as well, one that showed the long-term stability of credit insurance companies in Europe in some ways, but that the four following years marked a time when issues had been mitigated in significant fashion.

The potential for another spike stems from the quality of information on the businesses in several eastern European nations. Kateryna Barabash, managing director and owner of IBcontacts, a Ukraine-based firm dealing in credit, legal and news services, said the information can be hard to analyze...if a credit manager can even get it at all.

“You have to realize there is a lot of information that is incorrect or out of date,” Barabash said, adding that a high level of nepotism plays into what is released by companies. “You have to verify this information with a buyer and your partner...don't rely just on existing database information.” Beyond that, she noted that perhaps the even bigger problem is getting data like financials since estimates of the rate of refusal for such requests tracks between “60% and 70%.”

In short, her sentiment was, if the company is not being transparent, they are very likely hiding something important in the grand scheme of creditworthiness.

-Brian Shappell, CBA, CICP, NACM staff writer

Those hoping for short-term optimism, especially on most member nations of the European Union, at the start of the content portion of FCIB's Annual International Credit & Risk Management Summit in Prague Monday got a bit of reality check from the Belgian-based economist serving as keynote speaker. However, he did note that the idea that there will be bumps, if not occasional “chaos,” doesn't mean things will always be bad between now and the increasingly far-off recovery.

Freddy Van den Spiegel, of BNP Paribas Fortis, said the global economy has largely experienced its chaos moment in the last several years since various bubbles burst in key nations like the United States and some in Europe. That said: credit professionals should not consider that moment to be something of the past.

“The chaos moment is still continuing; this is the world in which we are,” said Van den Spiegel. “But there is a natural chaotic nature of any system or human behavior. And you can't just hide until the storm is over.” As such, strong risk management practices are going to continue to grow in importance in credit departments, but they will also grow in difficulty.

Meanwhile, perhaps the biggest event that needs to happen, in Van den Spiegel's view, is the European Union finally moving towards a more united bloc on issues of banking and politics. That includes having a true “president” type figure as well as a European Central Bank that exists more like the Federal Reserve of the U.S. in scope. But politics may keep that on hold because of the the election in Germany, by far the strongest EU member, coming up in September.

Van den Spiegel noted that it was unlikely anything would happen before then because the current leadership backing plans to ease back on austerity elsewhere and essentially fund bailouts in places that have not been as fiscally responsible could raise the ire of German voters. But, he believes, the Merkel government will come around, assuming the incumbents remain in power.

“There are really no other solutions,” he said. “The hurdle is that austerity on countries that failed limits their ability to grow. If they cannot grow, they cannot recover. You need balance right now.”

-Brian Shappell, CBA, CICP, NACM staff writer

The Finance, Credit and International Business Association (FCIB) is already an important global source of exporting education and professional networking. Now, however, the association is expanding to become a portal through which exporters of all sizes can find the tools and resources they need to effectively grow their business through international trade.

Most recently, at the Port of Los Angeles' Trade Connect seminar held on May 8, FCIB, in partnership with the U.S. Department of Commerce's International Trade Administration (ITA), unveiled the first-ever Spanish-language edition of the ITA's Trade Finance Guide. FCIB member Diego Jiménez, ICCE, credit analyst at Accuride International, Inc., was instrumental in the review of the translated guide, as well as to the program of this week's Trade Connect seminar. Another FCIB member, Timothy Bastian, ICCE, corporate credit manager for Western Oilfields Supply Company, also presented a session at the event.

The announcement came on the heels of FCIB and ITA signing a new memorandum of understanding (MOU) in order to increase awareness in the U.S. business community, particularly among small and medium-sized businesses, of the opportunities offered by exporting, as well as the tools and resources available to companies through the two organizations. The MOU builds on previous collaborations between FCIB and ITA, beginning with the drafting of the original Trade Finance Guide, its subsequent updates and now its first Spanish-language edition.

“By working together, FCIB and ITA are making it easier for all U.S. companies to take advantage of the exporting opportunities offered around the globe," said FCIB's Director–Americas Marta Chacon, CICP. "The Trade Finance Guide, which is now in its third edition and is now available to Spanish-speaking business owners, is only the first step in what will be a long line of collaborations geared toward unlocking world markets for businesses of all sizes."

Through the MOU and updated Trade Finance Guide, FCIB is becoming more deeply ingrained in the policy goals outlined in President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. FCIB's partnership with ITA puts them in good company with the U.S. Commercial Service's other strategic partners and will enable the association to better support the goals of the NEI by educating U.S. businesses about the benefits of exporting and directing them to the wealth of public and private resources available to assist them.

- FCIB
 

The National Association of Credit Management’s CMI for April 2013 for April 2013, available by Tuesday afternoon, is expected to report less than optimistic conditions, including more companies feeling the stress of the slow economy and failing to meet payment terms.
 
The release will illustrate that the Credit Managers’ Index (CMI) for April fell to levels not seen in over a year. Though still expected to be in expansion territory (above a level of 50), things are certainly heading in the wrong direction. The real damage to the CMI is expected to come from the unfavorable factors categories. To wit, the most dramatic declines are to be found in dollar amount beyond terms and amount of customer deductions.

“The collapse in dollar amount beyond terms signals that many companies have entered the danger zone,” said NACM Economist Chris Kuehl, PhD. “The sense is that many companies are now on the brink of real trouble, and if the economy continues to stall, there will be some overt business collapse in the next quarter or two.”

There are expected to be some positive notes, including a slight gain and stability, respectively, in the sales and new credit applications categories comprising the favorable factors index.

-NACM

The complete CMI report for April 2013, available by Tuesday afternoon, contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

A new study by the United Kingdom-based branch of Dun & Bradstreet suggests updates the European Union Late Payments Directive already are having an impact on payment behavior, at least in Britain.

D&B’s statistics noted that British businesses borrowing on terms paid their bills on aggregate two days faster in 2012 than in the previous year. At an average of 17-days late, British businesses’ tardiness on terms reached a record level in 2011, said D&B. Directive updates in the EU, last done in summer 2011, represent an important legal development designed to ensure the payment of business-to-business invoices is conducted within 60 days, and public authority-to-business invoices within 30 days. In theory, it is a win for suppliers. But there some potentially conflicting fallout exists, as D&B noted:

"This legislation makes it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days for business and 30 days for public authorities.  Whilst it will help protect some businesses [suppliers], the updated Directive presents new risks for companies [customers] struggling to manage their finances and pay on time, due to the potential interest liability risk."

In addition, to assume the directive will drastically improve payment habits within the debt-struggling EU may be a bit of a leap of faith. Though talking about the potential for EU-wide changes to bankruptcy/insolvency laws not the Late Payment Directive, a point made by Thomas Voller, an attorney with Germany-based Voller Rechtsanwälte and member of EuroCollectNet, could be considered. This is the case in part because, as Voller put it, there really isn’t all that much unity, from a continuity sense and legal perspective, in the euro zone.

“There is a tendency in the European Law to try to unify the rules and to find a common applicable law for all European states in some areas,” he told NACM for the international bankruptcy-focused article “Moving Targets” in the May edition of Business Credit (available next week). “Obviously, this is extremely difficult, and it works only in some special fields.”

Whether B2B payment is one of those fields perhaps waits to be seen.

-Brian Shappell, CBA, NACM staff writer

Officials from the European Commission will be attending and exhibiting at FCIB’s Annual International Credit and Risk Management Summit at the Corinthia Hotel in Prague next month and will be hosting an information seminar on Late Payment Directive at the same venue following the conclusion of the FCIB conference on May 14 at the same venue.

The statement made by this month’s Credit Managers' Index, available now at www.nacm.org, was essentially “steady as she goes.” The CMI fell by less than a point from February, with both favorable and unfavorable factor indexes dipping by roughly equal amounts. Some sub-factors showed significant movement, but there was no clear signal from any of the factors as far as financial stress is concerned, or anything to cause much confidence either.

Among areas of concerned is a notable decline in sales levels in March, though it not far off the pace of late 2012. “The main concern is that for the last year, the sales reading has been averaging in the low 60s and now there seems to be a struggle to get there again,” said NACM Economist Chris Kuehl, PhD. On the encouraging side, the new credit applications foretell a desire for expansion on the part of businesses.

“Businesses are starting to more aggressively pursue credit,” said Kuehl. “However, serious issues remain in balancing the desire for more credit and creditworthiness.” He also added that unfavorable factor index statistics indicated there are more companies in distress than was the case a month or two earlier, and that likely reflects the consternation regarding government inactivity on key issues.

Overall, the economist noted that the March CMI is “telling roughly the same story as other economic indicators of late…Nothing is suggesting a return to recession, but neither is there a sure sign of an imminent breakout in the manufacturing or service sectors.”

-NACM staff
For complete March CMI data and analysis, visit http://web.nacm.org/cmi/cmi.asp.

Less than one year after its lavish opening, Revel AC Inc. has made official its filing for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Camden, NJ. The filing, heavily rumored since last month, was made following a debt-for-equity swap agreement for which secured lenders signed off. The bankruptcy hearing is tentatively slated for mid-May.

Revel, featured as a potential filer just days after NACM’s “Industries to Watch” series highlightied the potential problems that could be caused by a glut of gaming operations in the Eastern United States, saw rumors spread like wildfire that the operator of Atlantic City’s Revel casino/resort property sought high-powered attorneys specializing in bankruptcy filings to look at its finances. Such finances already include $1.5 billion of debt and just over $1 billion in assets at a time when economic growth seems to be easing, in addition to more competitors in neighboring states coming online with legalized gaming operations and the budgets of potential local customers still impacted by the lingering effects of Hurricane Sandy.  

Patrick Spargur, ICCE, credit and collections manager with Bally Technologies, Inc. speculated there could be two or three filings on the part of Atlantic City-based operations alone this year. Creditors selling directly to or downstream from Eastern-based gaming operations in any significant capacity need to be aware of the potential trend.  

-Brian Shappell, CBA, NACM staff writer

Credit professionals looking for unique financing solutions should see where investors want to put their money. That was just one of the many insights offered during yesterday's FCIB New York International Roundtable, held at the offices of Lowenstein Sandler, LLP. During the event-ending panel, titled "Non-Traditional and Creative Methods for Receivables Management and Working Capital Finance," professionals from the brightest corners of commercial trade financing offered attendees some new ideas on how to approach managing their receivables.

Panelist John Barone of JP Morgan noted that credit professionals often fail to see the big picture in terms of how receivables are securitized and financed, cutting themselves off to a number of financing options. In essence, he made the point that creditors and their companies should look to areas where investors want to put their money, and investors are currently looking to invest in so-called high-yield markets. "When we discuss high-yield we mean any company that is rated BBB or less," said Barone. "If you were to look at a group of European high-yield names and you also look at the default rate and how those names as a portfolio have traded, the spread was astronomical."

Ultimately, the idea is that the greater the risk, the greater the reward, a fact that means greater profits for investors and thus greater access to unique financing solutions for companies looking to finance sales to this area. "Many of the credit professionals that we talk to don't look at this," said Barone. "They analyze those individual customers and they tend to not step back and think about things on a more macro basis. The market for high-yield risk in Europe is growing. Investors are looking to put their capital somewhere and they're looking for something they can also get a yield on their capital." Europe is one place where creditors can hope to increase sales while hedging their risks because investors are more interested in taking the risk of securitizing such transactions with puts and other financing options.

See more about this year's New York Roundtable in today's edition of NACM's eNews. For more information on FCIB's other educational and networking opportunities, click here.

- Jacob Barron, CICP, NACM staff writer

 

As predicted in a 2011 Business Credit magazine article, the United States’ solar energy industry has taken its share of lumps over the last two years, but there are still those purporting the massive potential that solar holds. Whether true or not, there are real and continuing risks for everyone involved in the industry, and the government budget fight and “sequester” only adds a whole new dimension to potential problems, especially for survivors of the first wave of domestic solar-related bankruptcies.

U.S. product manufacturers are contending with what they see as unfair assistance to competing solar manufacturing sectors in Asia by their governments, especially that of China. The U.S. placed tariffs on Chinese imports, but the measures were seen as somewhat weak and coupled with evidence that some Chinese firms are simply off-shoring operations to areas like Singapore where such tariffs aren’t in play. In addition, the glut of U.S. producers left over from the cheap lending days of the financial boom of the late-2000s caused an industry saturation that became a real problem when demand fell during lower growth years. The two issues led to several high-profile bankruptcy filings headlined by that of Solyndra, which had ties to key Obama Administration fundraisers investigated for widespread fraud and reaping huge amounts in government grants.

Michael Joncich, manager of the business insolvency department for NACM affiliate Credit Management Association for NACM affiliate Credit Management Association, was among those who predicted the problems in 2011. He now speculates that reduced federal subsidies, grants and other assistance aren’t likely to help current matters. “Government can make or break an industry. I don’t really know if the shakeout is done yet,” he said.

Joncich noted that a colleague in the liquidation business recently learned everything he could about green businesses, thinking it was a bubble ready to pop, especially once it became apparent that the government was retracting its “generous funding” of those industries, including solar. “The observation is that they can’t seem to fund themselves,” he said. “When the government pulls back because of federal budget cutbacks, many can’t survive it,” he said.

It doesn’t mean all solar manufacturers are doomed, but there are enough red flags that virtually all creditors dealing with customers related to the solar industry should be paying close attention to them, their accounts and their terms.

- Brian Shappell, CBA, NACM staff writer
 

New learning tracks and the evolution of professional designations are part and parcel for keeping up with the varying and progressing needs of today’s business professionals, including those in credit. After a review of existing programs, and careful consideration and development, NACM announced in March the latest in a long line of world-class program designations: The Certified Credit and Risk Analyst (CCRA).

The CCRA is unlike NACM’s other longtime designation programs in that it is a standalone program. It exists outside of NACM’s “Career Roadmap” that includes the Credit Business Associate (CBA), Credit Business Fellow (CBF) and Certified Credit Executive (CCE), the latter of which is still NACM’s top-level designation for members.

The CCRA was created after Financial Statement Analysis II was removed from the CBF designation, with the new requirements effective January 1, 2013. NACM’s Education Department updated the extracted course and renamed it Financial Statement Analysis, Interpretation and Credit Risk Assessment to better reflect its emphasis. The updated version is now considered by NACM to be the cornerstone of the CCRA.

“We realized that Financial Statement Analysis II wasn’t for everyone, and that it served as a bit of a roadblock to the CBF for some members. However, we also recognized that some credit department personnel need that in-depth, advanced financial analysis background, which is why this standalone designation was created,” said NACM President Robin Schauseil, CAE.

As with other designation courses, Financial Statement Analysis, Interpretation and Credit Risk Assessment can be taken by itself as a certificate session. However, earning the CCRA requires the completion of three courses: Basic Accounting, Financial Statement Analysis I and the new Financial Statement Analysis, Interpretation and Credit Risk Assessment. The methods available to complete each course vary and can be found under “Education” at www.nacm.org. The first opportunity to take Financial Statement Analysis, Interpretation and Credit Risk Assessment is a five-segment session and exam held at Credit Congress from May 18-23.

Though separate from the “roadmap” lineup of certifications, the CCRA will serve as key program for credit professionals tied to deeper financial analysis responsibilities, and for those who will be in the future. It is also designed to build background and add key skill sets for those already pursuing a designation. “If you’ve earned your CBA and want, or need more financial analysis skills, this is for you,” Schauseil said. “It’s a great precursor to the CCE even though it’s not a part of the NACM career roadmap. It’s also a great precursor for NACM's Graduate School of Credit and Financial Management.”

To learn more about the CCRA, visit Education at www.nacm.org, or call 410-740-5560.

The Credit Managers’ Index (CMI), due for release by NACM on Thursday morning, isn’t expected to set any records, but the February statistics do appear set to track more favorably than in January.

One of the most important factors to watch, sales, is expected to show an uptick even though non-business factors seem to be playing a significant role as a drag on the category. “The strength of this indicator can’t be overlooked, as this signals substantial activity despite all the concerns registered over the ‘fiscal cliff,’ the debt ceiling and the sequester” said NACM Economist Chris Kuehl, PhD. “However, the impact has been hard to figure out. On the one hand, it is pretty obvious that the lower GDP number from the fourth quarter was directly related to fiscal cliff concerns within the business community, but the latest revisions show no dip into recession, as first thought.”

Unfavorable factor index categories are expected to show progress or at least stability. Also expected to track well are service-side indicators, in part because of what appears to be the long-awaited rebound of the housing sector. Granted, it has a long way to go. The manufacturing sector likely will be dicier in the February CMI.

Words like “caution” and “reluctance” appear to be the most bandied about in the manufacturing world, again, most likely because of ongoing problems to get things done by Washington, DC lawmakers. And, since manufacturing-based decisions must be made in advance, confidence in where things are going is crucial. That has been largely absent in advance of the February CMI.

“All of this is taking place against a backdrop of political drama that many believe will cause serious economic dislocation before all is said and done, and it seems to be the manufacturing sector that is harboring the most concern,” said Kuehl. Fortunately, with some of the most stressed sectors on the service side making what look to be a series of comebacks, it should be enough to offset the uncertainty that is dogging manufacturing at present.

-National Association of Credit Managment

The February CMI, with full statistics and analysis, are available now at www.nacm.org.

The appetite for gambling in the United States is one of those things that never seems to fall out of fashion. And, while there has been quite a boom in the Eastern U.S. for legalization of gaming operations in recent years, the surge could cause some operators to eventually go bust to the surprise of some flat-footed creditors.

Maryland is just the latest state to allow, by voter referendum in this case, expanded gaming operations at several sites throughout the state, which will include table games as well as “slot-parlor” offerings. Ohio is a recent player in the market, too, with several operations. This adds to relative newcomers in recent years like Pennsylvania (there are at least three casinos running within the borders of Philadelphia alone), West Virginia and Delaware, not to mention the many longtime operators of Atlantic City, NJ and a couple on Native America land in Connecticut.  What does that mean to suppliers of everything from gaming machines to carpeting to food services to cups for beverages that end up in these casinos? It means there is plenty of competition and real potential for market saturation, according to Patrick Spargur, ICCE, credit & collections manager with Bally Technologies Inc.

Large appetite for gaming or not, some operators likely will face the reality that there is not enough demand for everyone to thrive or even survive without solvency issues. Spargur, who will moderate the May 22 FCIB-designed educational session “Working Capital Management & Cash Forecasting” during Credit Congress in Las Vegas, told NACM some that he believes some companies will indeed face danger because of the high number of operators.

“There’s just a lot more competition in the surrounding region, and it’s major competition,” Spargur said. “Analysts I follow say, in Atlantic City alone, three to five properties need to be either shut down or converted into boutique hotels. There are too many players: Ohio is pulling [customers] from Pennsylvania; Pennsylvania is pulling from Atlantic City; West Virginia is pulling from Pennsylvania.”

In short: the spreads for various legal casino operations are going to be different from place to place and need to be monitored like a hawk by credit departments of direct suppliers to them and those upstream alike. It serves as a reminder that is critical to know an industry well, beyond overall numbers for a large region.

-Brian Shappell, CBA, NACM staff writer

Industries to Watch is a new feature of NACM’s blog (first run) and eNews. It will be a semi-regular look at areas where business credit professionals need to be focusing on for potential solvency issues because of a bevy of reasons (supply glut, government regulations or policy changes, dropping demand, etc.).